Subsection 74(1) - amalgamation of issuer and holding company to take place five daysafter issuance of receipt for issuer's prospectus - Amalco not a reporting issuer -holders of common shares of Amalco applying for relief from first trade restrictionsimposed by subsection 72(5) of the Act - first trade in shares not subject to subsection72(5) of the Act - Amalco to apply for order deeming it to be reporting issuer.
Securities Act, R.S.O. 1990, c.S.5, as am., ss. 1(1) "reporting issuer"(e), 72(1)(j), 72(5)and 74(1).
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
DELANO TECHNOLOGY CORPORATION
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "DecisionMaker") in each of Ontario and Alberta (the "Jurisdictions") has received an application(the "Application") from Delano Technology Corporation (the "Filer") for a decisionunder the securities legislation of the Jurisdictions (the "Legislation") that therequirements contained in the Legislation that certain first trades of securities acquiredin exchange for securities of the Filer in connection with the amalgamation of the Filerwith XDL Delano Holdings Inc. ("XDL Holdings") shall not be subject to the resalerestrictions which would otherwise apply to first trades of these securities under theLegislation;
AND WHEREAS the local securities regulatory authority in Ontario has receivedan application from the Filer for a decision under the securities legislation of Ontariodeeming that the amalgamated company ("Amalco") that will be continued upon theamalgamation of the Filer and XDL Holdings will be a reporting issuer in Ontario;
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief(the "System") the Ontario Securities Commission is the principal regulator for thisApplication;
AND WHEREAS the Filer has represented to the Decision Makers as follows;
1. The Filer was incorporated under the laws of the Province of Ontario on May 7,1998. The head office of the Filer is located in Richmond Hill, Ontario.
2. The authorized capital of the Filer consists of an unlimited number of commonshares, an unlimited number of Class A special shares, an unlimited number ofClass B special shares, an unlimited number of Class C special shares and anunlimited number of preference shares, issuable in one or more series.
3. As at December 31, 1999, there were 3,500,000 common shares issued andoutstanding, 4,000,000 Class A special shares issued and outstanding and3,789,476 Class B special shares issued and outstanding. As at December 31,1999, there were no Class C special shares issued and outstanding and nopreference shares issued and outstanding.
4. The Class A special shares, Class B special shares and Class C special sharesare automatically convertible into common shares immediately prior to thecompletion of a Canadian public offering of common shares pursuant to aprospectus or a sale of common shares in a public offering registered under theUS Securities Act of 1933, as amended, that results in an aggregate netproceeds to the Filer of at least $20,000,000, at a price per share which is basedon a pre-offering valuation of the Filer of not less than $30,000,000 (a"Qualifying Offering").
5. As of the date hereof, the Filer is not a reporting issuer under the Legislation.However, the Filer filed a preliminary prospectus on December 14, 1999 and anamended and restated preliminary prospectus dated January 12, 2000 (the"Preliminary Prospectus") with the Jurisdictions. The Filer intends to file a finalprospectus (the "Final Prospectus") based on the Preliminary Prospectus thatwill qualify the distribution of 5,000,000 common shares (the "New CommonShares") and 6,490,386 common shares issuable upon the exercise of specialwarrants ( the "Special Warrant Common Shares"). The New Common Sharesare being offered concurrently in the United States. On January 12, 2000, theFiler filed with the Securities and Exchange Commission a registration statementon Form F-1 relating to this offering.
6. XDL Holdings was incorporated under the laws of the Province of Ontario onJuly 14, 1998 and is not a reporting issuer under the Legislation of Ontario. Theauthorized capital of XDL Holdings consists of unlimited number of commonshares and Class A shares of which 3150 common shares and 1,100 Class Ashares are currently issued and outstanding.
7. Pursuant to the amalgamation agreement dated November 30, 1999, asamended (the "Amalgamation Agreement") the Filer will amalgamate with XDLHoldings (the "Amalgamation") to form an amalgamated company ("Amalco")under the provisions of the Business Corporations Act (Ontario) immediatelyfollowing the deemed exercise of the Filer's outstanding Special Warrants fivedays after the date on which a receipt is issued by the last of the securitiesregulatory authorities in the Jurisdictions.
8. The Final Prospectus in respect of the Offering will disclose that:
(a) an Amalgamation is being undertaken in connection with the completionof the Offering, with the result that the shares of the Filer currently held byXDL Holdings will be cancelled and the persons that currently hold sharesof XDL Holdings will acquire shares in Amalco upon the Amalgamation;
(b) XDL Holdings was formed as an investment vehicle to hold securities ofthe Filer; and
(c) XDL Holdings has no material assets or liabilities other than securities ofthe Filer; and
(d) under the Amalgamation Agreement, the name, articles and by-laws ofAmalco will be identical in all material respects to the name, articles andby-laws of Delano; and
(e) the common shares of Amalco will be identical to the common shares ofthe Filer in all material respects.
9. The Amalgamation Agreement has been approved by the board of directors andshareholders of each of the Filer and XDL Holdings.
10. In connection with the Amalgamation, shares of the Filer currently held by XDLHoldings will effectively be distributed to the persons and entities that currentlyhold shares of XDL Holdings such that the shareholders of XDL Holdings (i.e.,indirect shareholders of the Filer) will become direct shareholders of the Filer.
11. The Legislation provides an exemption from the registration and prospectusrequirements thereof for a trade made in a security of a company that isexchanged for the securities of another company in connection with a statutoryamalgamation (the "Amalgamation Exemption").
12. Pursuant to the Legislation, a first trade in securities acquired under theAmalgamation Exemption is a distribution except where, among other conditions,one of the amalgamating corporations is a reporting issuer and has been areporting issuer for at least 12 months (the "Resale Restriction").
13. If the Amalgamation had occurred prior to the closing of the Offering, the holdersof the New Common Shares and the Special Warrant Common Shares would notbe subject to the Resale Restriction.
14. The holders of the New Common Shares and the Special Warrant CommonShares will receive in the Final Prospectus full, true and plain disclosure of allmaterial facts relating to the securities issued by the Filer pursuant thereto andof the securities to be issued by Amalco upon the Amalgamation.
15. Pursuant to the Amalgamation Agreement, the name, articles and by-laws ofAmalco will be identical to the name, articles and by-laws of the Filer in allmaterial respects. The common shares in Amalco following the amalgamationwill be identical to the common shares in the Filer in all material respects.
16. The holders of New Common Shares and Special Warrant Common Sharesshould not be prejudiced because of the decision to effect the Amalgamationafter rather than before the Offering; and
17. Following the amalgamation, the Amalco will not be a reporting issuer in Ontariobut will remain a reporting issuer in Alberta unless or until the Decision Maker inOntario makes a decision pursuant to section 83.1 of the Securities Act (Ontario)deeming the Amalco to be a reporting issuer in Ontario.
AND WHEREAS under the System, this MRRS Decision Document evidencesthe decision of each Decision Maker (collectively, the Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test containedin the Legislation that provides the applicable Decision Makers with the jurisdiction tomake the Decisions has been met;
THE DECISION OF THE DECISION MAKERS under the Legislation is:
that a first trade in shares of Amalco issued in exchange for NewCommon Shares or Special Warrant Common Shares pursuant to theAmalgamation is not a distribution unless it is a trade of such shares fromthe holdings of any person, company or combination of persons orcompanies holding a sufficient number of any securities of Amalco toaffect materially control of Amalco, but any trade of such shares from theholdings of any person, company or combination of persons or companiesholding more than 20 percent of the outstanding voting securities ofAmalco shall, in the absence of any evidence to the contrary, be deemedto affect materially the control of Amalco.
February 8th, 2000.
"J. A. Geller" "Howard I. Wetston"